Question
Rose John started white Rose Management Consultancy on 14th January 2019 with a capital of Rs 50,00,000. The company maintains a 1:1 debt-equity ratio and
- Rose John started white Rose Management Consultancy on 14th January 2019 with a capital of Rs 50,00,000. The company maintains a 1:1 debt-equity ratio and pays monthly interest at the rate of 12 per annum on its long-term loans.
The company provides the financial and investment service to clients and charges Rs 5000 per client.
Months
Nov 2021
Dec 2021
Jan 2022
Feb 2022
March 2022
April 2022
Number of clients
150
150
100
120
150
75
The company pays a monthly rent of Rs 20,000, and the monthly salary to the employee is 10% of the service revenue earned during the month. The salary of the employee is paid in the first week of next month. Other variable costs are 50% of service revenue and paid in the same month.
The fixed overheads are Rs 1,000 per client calculated for the normal capacity of 100 clients.
The company collects 50% of service revenue in the month of service, and the remaining 45% in the month after service, 5% of the revenue becomes bad debt.
Further, on 1st June 2021, the company purchased the two computers at the rate of Rs 50,000 each and payable in equal ten installments at the end of each month without interest.
If the company gets the closing cash above Rs 2,00,000, then the excess cash of the month will be invested in the liquid schemes of mutual funds in the first week of next month. These investments are expected to earn a return of 6% per annum, and can be converted into cash as and when required. The return on the mutual funds will be credited at the end of each month.
The company maintains a minimum cash balance of Rs 1,00,000 and borrows money (in the nearest denomination of Rs 1000) from the bank at the rate of 12% per anum to cover a shortage. The short-term loans with interest will be refunded before investing the money in mutual funds when the cash balance is more than Rs 2,00,000
The company plans to pay out Rs10,00,000 of its long-term loan in March 2022.
The cash balance (including liquid investments) on 31st December 2021 was 4,50,000.
Prepare a cash budget for Jan to April 2022. Also, explain how this cash budget will help the company efficiently manage its funds.
- Rose John started white Rose Management Consultancy on 14th January 2019 with a capital of Rs 50,00,000. The company maintains a 1:1 debt-equity ratio and pays monthly interest at the rate of 12 per annum on its long-term loans.
The company provides the financial and investment service to clients and charges Rs 5000 per client.
Months | Nov 2021 | Dec 2021 | Jan 2022 | Feb 2022 | March 2022 | April 2022 |
Number of clients | 150 | 150 | 100 | 120 | 150 | 75 |
The company pays a monthly rent of Rs 20,000, and the monthly salary to the employee is 10% of the service revenue earned during the month. The salary of the employee is paid in the first week of next month. Other variable costs are 50% of service revenue and paid in the same month.
The fixed overheads are Rs 1,000 per client calculated for the normal capacity of 100 clients.
The company collects 50% of service revenue in the month of service, and the remaining 45% in the month after service, 5% of the revenue becomes bad debt.
Further, on 1st June 2021, the company purchased the two computers at the rate of Rs 50,000 each and payable in equal ten installments at the end of each month without interest.
If the company gets the closing cash above Rs 2,00,000, then the excess cash of the month will be invested in the liquid schemes of mutual funds in the first week of next month. These investments are expected to earn a return of 6% per annum, and can be converted into cash as and when required. The return on the mutual funds will be credited at the end of each month.
The company maintains a minimum cash balance of Rs 1,00,000 and borrows money (in the nearest denomination of Rs 1000) from the bank at the rate of 12% per anum to cover a shortage. The short-term loans with interest will be refunded before investing the money in mutual funds when the cash balance is more than Rs 2,00,000
The company plans to pay out Rs10,00,000 of its long-term loan in March 2022.
The cash balance (including liquid investments) on 31st December 2021 was 4,50,000.
Prepare a cash budget for Jan to April 2022. Also, explain how this cash budget will help the company efficiently manage its funds.
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